Link to "Will the Medical Technologies Industry “Move Forward” under Obama?" webinar recording: http://www.frost.com/prod/servlet/analyst-briefing-detail.pag?mode=open&sid=269071449
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Transcript
Medical Technologies Industry ‘Moving Medical Technologies Industry ‘Moving Forward’ under Obama?Forward’ under Obama?
Election Implications for the SectorElection Implications for the Sector
•Oversees analyst team charged with tracking the advanced medical
technologies industry, spanning medical devices, medical imaging, and
patient monitoring.
•Provide market intelligence solutions to help clients across the supply
chain spectrum to identify market opportunities and develop strategies
tailored to their business goals.
•8 + years of market intelligence gathering and custom consulting
experience
Agenda
• What Now
• Tax Implications
• PPACA Implementation
• Challenges
• Opportunities
• Strategies
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• Strategies
What Now
Elections Maintain
Status Quo
•Republicans-House, Democrats- Senate & White House.•Presidential Veto Power •Supreme Court Appointments•Leadership Status Quo: CMS, HHS, FDA
Remaining •Medical Device Tax Repeal Bill•Resistance at State Level
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Remaining Avenues for
Recourse
•Resistance at State Level•‘Fiscal Cliff’ Negotiations
Market Activity
•Changes in Sales Strategies
•Companies Move Forward with ‘Plan A’•Increased M&A Activity•Increased Cost Cutting Measures •Venture Investment Rebound•Changes in Sales Strategies
Medical Technology Market Dashboard (United States)
Market Growth CAGR
6.3 %
Medical Technology
Market Revenue
$175 B
(2012)
Procedure Volumes Growth Rate
4%
(2013-2020)
Product PricesNumber of Public Companies
254
(2013-2020) (2013-2020) (2011)
5
Average Operating Margins (TTM)
9%
(2012)
VC Funding into Medical Devices and Equipment
$2.8B
(2011)
Average Industry Gross Margins (TTM)
50%
Average R&D Expense as % of Sales
8%
(2012)
M&A Activity
(2013-2020)(2012)
Medical Device Tax Burden Estimates
$ 75 B 35% 45% $270 MLarge Multi-Industry
Conglomerate
Tier 1 Broad Medical
Technology Company
Tier 2 Niche
$ 9 B 95% 70% $138 M
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*Applies to Tax Eligible Devices
Tier 2 Niche Medical
Technology Company
Tier 3 Single Product/Technology
Firm
Start-Up Early Stage
$ 2.5 B 98% 85% $48 M
$ 650 M 100% 90% $14 M
$ 50 M 100% 90% $1 M
Medical Device Tax Implications
Impact on Innovation
•Irrational to Take Tax From R&D
•Innovation Pipeline Remains Strong
Impact on Pricing
•Passed to Customer?
•Reduced Discounting
•Premium Priced Novel Therapies
7
Novel Therapies
Cost Cutting Measures
•Layoffs
•Outsourcing
•Divestitures/ Spin-offs
Cost Cutting Measures
Impact on Supply Chain
•Contract Manufacturers
•Component Suppliers
2013
PPACA Enactment Timeline- Key Provisions
•Increased Federal Match for CHIP
•Escalation of Individual Mandate Penalties
•Health Care Choice Compacts
•Tax on High Cost Insurance
•Expanded Medicaid Coverage
•Individual Health Coverage Mandate
•Health Insurance Exchanges
•No Annual Limits on Coverage
•Device Excise Tax
•State Notification of Health Exchanges
•Medicare Tax Increase
•Medicaid Increases for Preventative Services, Primary Care
2014 2015-2018
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•Tax on High Cost Insurance Programs
Coverage
•Can Not Deny Coverage Due To Pre-existing Conditions
•Employer Penalties for Not Offering Coverage Benefits
•Fees on Health Insurance Sector
Primary Care
•Limits on Flexible Spending Accounts
•Sunshine Act Disclosures
•Increased Itemized Deductions for Medical Expenses
Realities of the New Market Place
Fail Fast
Product and tactical sales strategies are being evaluated for quick return, resource limitations constrain a company’s ability to support lagging business models.
U.S. from Exporter to
Importer of Med Tech
Currently one of few the markets where the U.S. has a significant trade surplus with the rest of world, shifts seen in other industries could play out as low cost manufactured products supplant products currently made in the United States.
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Tech products supplant products currently made in the United States.
Deemphasize the Clinician
Deemphasize Products
Purchase decisions are moving away from clinicians to hospital based administrators for bulk low grade technologies and high end capital equipment, and more individual emphasis for implants and other patient centric products.
As products increasingly become commoditized and the tax burden is placed on medical product sales, companies are increasingly looking to build revenue mix from service, software, enhanced support, and other offerings.